Ethylene hits seven-month low in U.S. during May

HOUSTON, June 1, 2012 /PRNewswire/ -- U.S. prices for the chemical building block ethylene reached a seven-month low in May, dropping below 50 cents per pound, according to PetroChem Wire, a daily newsletter serving the petrochemical industry.

Reduced ethylene production due to plant maintenance closures supported the ethylene market earlier in the second quarter. Ethylene peaked at just over 75 cents per pound at the beginning of April. On May 31 it traded at 46.5 cents per pound.

"Two factors have affected the ethylene price during May," said Kathy Hall, PetroChem Wire's chief editor. "Supply availability has been increasing as various ethylene plants complete their maintenance turnarounds. Also, the U.S. ethylene price had reached a level that kept downstream markets like polyethylene from being competitive in the global marketplace. Without export market options, inventories built in those markets which backed up into the ethylene market."

The margins for ethylene producers are better now than they were last October when ethylene also traded around 47 cents per pound because ethane is cheaper. But the differential between the chemical and the raw material used to make the chemical is not as wide as it was a month ago because the decline in the ethylene price has outpaced the drop in the cost of ethane. That differential was 49 cents per pound at the end of April and is now 36 cents per pound. In October it was about 20 cents.

A weaker market for polyethylene, which is a major plastic made from ethylene and is used to produce everything from plastic bags to toys to sporting goods, has contributed to the drop in ethylene. Sluggish demand for ethylene glycol, which is used to produce PET resin and also is used to make antifreeze, is also a factor in ethylene's decline.

PetroChem Wire's ethylene price is used to settle daily contracts for the chemical traded on the New York Mercantile Exchange and is considered to be a global benchmark price.

PetroChem Wire is a daily newsletter serving the petrochemical industry. It counts major petrochemical and refining companies among its readers as well as major manufacturing concerns, global conglomerates, industry consultants, equity analysts and government agencies. It also produces maps of the ethylene plant and pipeline system. www.petrochemwire.com